Educational materials need to be delivered on the front end

As we know it, the Loan Estimate (LE) combines the TIL and GFE. The design principles, per the MBA Compliance Essentials handbook, for the LE are:

Less text, more graphical design

Information not education

More important and usable information earlier

LE and Closing Disclosure (CD) should match

One-page mortgage shopping sheet

The consumer will see some basic questions answered upfront: “Will my loan amount, interest rate or monthly P&I increase?” All of that seems very straightforward, but what if the loan does have a pre-payment penalty or perhaps a balloon payment? Is there some education available that is handy to understand items like a pre-payment penalty or balloon payment?

Education is critical to understanding the information. The spirit of the rule as we have mentioned in previous blogs is education, fairness and transparency for the consumer with an overall goal of having a confident consumer show up to closing.

The LE form is much cleaner and easier to read, but the average consumer could still be confused by what various terms mean. In order to get a more confident consumer to show up at closing, the creditor must deliver accompanying education material specifically geared towards understanding definitions and terms displayed on the LE form.

How have you planned on providing more information and education to the consumer?

All information and views expressed or implied are provided without warranty and are only the opinion of Pavaso, Inc. Each participant should seek legal representation for legal interpretation of the ruling and the CFPB directly for final instruction and interpretation. The final rule can be found here.

Chris Ayoub is the Chief Operating Officer at Pavaso, Inc. In addition to his service as a combat veteran, he has spent his career leading teams of multiple sizes and capabilities in the IT and Mortgage industries.

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